Fate of US scrap prices in October largely in flux due to falling export prices, potential railroad strike

Wednesday, 14 September 2022 22:59:42 (GMT+3)   |   San Diego
       

Scrap market sources from throughout the US are largely mixed when it comes to their predictions for October, as the weight of opposite forces on the market, namely, falling export prices into Turkey and a potential US railroad strike, are still being evaluated.

For example, earlier this week, SteelOrbis reported that Turkey’s import scrap pricing is deteriorating rapidly, noting that “pessimistic sentiment within the market is prevailing.”

Perhaps not surprisingly, an Istanbul-based source has since indicated that Turkish mills’ expectation for ex-US cargoes is approximately $350/mt CFR, which reflects an approximate $50/mt CFR drop from ex-US cargoes that were booked in mid-August.

“I know that the exporters are going to take their prices down until the slide in Turkey stops,” an East coast-based source said. “What’s going on with export could absolutely impact [domestic scrap prices] next month.”

A second source agreed.

“The complicating factor is how low Turkey will go,” he said. “Turkey is a significant factor.”

And while a Chicago-based source said he thinks that “scrap prices can’t fall anymore,” and that he doesn't know what to expect, he believes that “if [prices are limp going into the] fourth quarter, I expect supply to be weak by the first quarter.”

Also of note, is that it’s also been heard that mills may try to take prices down again next month, to the tune of down $10-$20/gt.  Sources in the Southeast have indicated that although it’s being widely heard that [scrap yard inflows] are off, that more scrap was offered to mills this month than what was needed. 

If that is the case, mills could potentially try to take prices down again before things start to level.

“It doesn’t feel good right now. Mills still seem to be struggling for sales,” a Midwest-based source said. “With the exception of the energy sector so many other steel sectors are not seeing any strength. Primes are more or less plentiful but cut grades and shredded flows are off. That said it might be enough to satisfy needs and still result in sideways to $10-20 down. The bottom line is that there’s nothing too good coming in October.”

On the other hand, multiple market players have said they’re keeping a very close watch on the potential US freight railroad strike, as this could have wide-spanning implications on the market.

According to national news outlets, two large rail labor unions have said they’ll strike unless they reach an agreement with railroad management regarding the addition of certain quality-of-life provisions, such as sick days, vacation days, and attendance policies, into their contracts.

CNBC reports that the unions in question represent roughly 50% of all unionized rail workers, adding that if they strike, “more than 7,000 trains would be idled.”  Not only would this trigger manufacturing shutdowns, it also has the potential to completely disrupt scrap transportation and delivery.

One source said he believes that scrap prices will absolutely trend upward next month if there is a rail strike, while another said he too believes a lot of what happens with October scrap pricing will hinge on what happens with the rail unions.

“It could disrupt mill scrap supply and cause havoc,” he said.

Although the unions could move to strike on Friday, negotiations are expected to continue through Monday.  Additional clarity on October pricing is expected to be available early next week.

 

 


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